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A historic breakthrough for fusion energy

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Welcome back to Energy Source!

Over the weekend, the Financial Times broke the news that US scientists had made a major breakthrough in fusion energy research. A lab in California created a fusion reaction that generated more electricity than they put into it, a crucial step towards creating limitless clean energy.

My colleague Tom Wilson, who had the scoop, breaks down what it means here for Energy Source readers. We will also learn more about the discovery from US energy secretary Jennifer Granholm at a press conference later this morning, so watch FT.com for the latest.

I want to know what ES readers think — will we have fusion power plants up and running by 2050? Take our poll below and I’ll report the results here on Thursday. You can let me know what you think at justin.jacobs@ft.com, too.

We also had a punchy interview with Joe Biden’s top international energy adviser Amos Hochstein, who called Wall Street’s refusal to let shale drillers throw the taps open again “un-American”. We have more from that interview in the newsletter today, including insights on the Russian oil price cap, the future of US LNG and how governments took over the oil market.

Thanks for reading as always. — Justin

The future of fusion power awaits

Many eyes today will be on the Department of Energy press conference at 10am in Washington, where Jennifer Granholm is set to announce that US scientists have achieved net energy gain in a fusion reaction for the first time in history.

Three people with knowledge of preliminary results from a recent experiment told the FT that the National Ignition Facility at the Lawrence Livermore National Laboratory in California achieved the feat in the past two weeks.

Soviet scientists developed the first fusion machine in the 1950s using a process called magnetic confinement fusion, which remains the most common approach. But until now, no group had been able to produce more energy from a fusion reaction than it consumed.

The National Ignition Facility, which opened in 2009, was primarily designed to test nuclear weapons by simulating explosions. Its approach to fusion is different. It is called inertial confinement fusion and involves firing the world’s largest laser at a tiny capsule of deuterium and tritium (isotopes of hydrogen) to create a rocket-like implosion that compresses and heats the fuel until the hydrogen atoms inside fuse, releasing energy in the form of neutrons.

Why we still have to wait for fusion power plants

Achieving the milestone of net energy gain is huge for the fusion industry, but it doesn’t mean that fusion power stations are now around the corner.

First, net energy gain in this context only compares the energy produced to the energy in the lasers, not to the total amount of energy pulled off the grid to power the system. A much larger energy gain would be needed to cover the immense amount of power needed to fire up the facilities’ huge lasers.

NIF also cost $3.5bn to build and makes a maximum of one shot a day. An internal confinement power plant would probably need to complete several shots a second and get at least 30 times more energy out than energy in.

However, the breakthrough has made that look more possible. “This significant advancement showcases the future possibilities for the commercialisation of fusion energy,” said Congresswoman Zoe Lofgren, the most senior incoming Democrat on the House Committee on Science, Space, and Technology.

The jury is still out on how quickly that can happen. Investment is finally flowing to private fusion companies — $2.83bn in the 12 months to the end of June. Many of those companies aim to have a working power plant at some point in the 2030s. Public sector scientists remain more cautious and talk about the 2040s or the 2050s.

One thing all agree on is that the NIF breakthrough should bring more interest and more money into the sector. In short, it’s a good time to be in fusion. The promise of an essentially limitless source of reliable, zero-carbon power is becoming increasingly hard to ignore. (Tom Wilson)

Hochstein: Wall Street’s hold on shale is ‘un-American’

We spoke with Amos Hochstein, the White House’s top international energy adviser, who has been at the centre of the US’s efforts this year on everything from the Russia oil price cap, the push to get more US energy to Europe and the failed talks to get Saudi Arabia to pump more oil.

Hochstein told Derek it was “un-American” the way Wall Street had put the clamps on the shale industry’s growth.

“The idea that financiers would tell companies in the United States not to increase production and to buy back shares and increase dividends when the profits are at all-time highs is outrageous,” Hochstein said.

I think there are plenty of shale executives who would agree with that sentiment, although they aren’t going to say so publicly. Shale’s wildcatters got into the business to find and produce as much oil and gas as possible, and make their fortunes along the way. They didn’t get into it to maximise dividend payouts to New York hedge funds. Shifting Wall Street demands on how oil producers use their cash have rankled people in the shale patch.

Here are three other highlights of Derek’s expansive conversation with Hochstein:

1. The US may not need more LNG plants beyond what’s already coming

This year’s energy crisis has set off a scramble to revive liquefied natural gas export projects that had looked like they would never get built.

But Hochstein, a former executive at Tellurian, which hopes to build a big new export plant on the Gulf Coast, says the projects already in the pipeline will provide enough supply.

“We already have a lot coming into the market from the United States in 2026 and beyond. A lot. Moreover, we know that Qatar is expanding and theirs will come on towards the second half of this decade. So I’m not sure that we need more. I don’t think that we need more LNG facilities to be built,” said Hochstein.

Rather, he says, investment needs to shift away from fossil fuels to things such as electric vehicles, solar and energy storage.

2. Governments are in control of the oil market

Hochstein argues that governments are the driving force in oil markets and energy companies and investors are along for the ride.

“As long as this war is continuing, the geopolitical elements in the market will continue to be dominant,” he said.

“Whether that is the war [in Ukraine] itself, whether that is the uncertainty around the Covid opening or closing rate in China. The role that Opec and some of its members are playing and the steps that the United States has been willing to take together with other [strategic oil] reserve holders . . . These are all steps that are government owned, controlled or influenced, and will continue to weigh heavily on swings in the market,” he said.

3. The Russian oil price cap is designed to cut the flow of petrodollars, not oil

The price cap on Russian crude has been among the most controversial aspects of the west’s response to Russian president Vladimir Putin’s full-scale invasion of Ukraine.

Some have criticised the cap for not going far enough to cut off Russia’s oil supply. Others argue sanctions are simply causing pain for western consumers and fanning inflation.

Hochstein said policymakers are trying to thread the needle of keeping Russian crude flowing, which the global economy needs, while limiting the petrodollars that flow back to Moscow.

“The price cap is there to do two things at the same time, really: One is to make sure that a sharp increase of price is not used to divide the [western] alliance and weaken the ability to support Ukraine. And the second is to make sure that there’s not an ability to surge the income of the aggressor to pay for continuing the aggression,” he said.

“If prices go back up to 85, or 90 [dollars a barrel], we don’t want [Putin’s] revenues to climb with that.”

But, he acknowledged that “it’s not going to be a silver bullet of taking away his ability to conduct the war. I agree with that criticism.”

Data Drill

Foreign companies are making big bets on US solar. Roughly 60 per cent of all announced module capacity will be from foreign manufacturers, according to data from Wood Mackenzie. The consultancy expects 45 gigawatts of new capacity by 2026.

European companies make up over half of all foreign commitments, followed by companies in east Asia.

“Foreign companies are the ones that have the most experience in the market,” said Sylvia Leyva Martinez, a senior analyst at Wood Mackenzie, who says that while many US-based companies have made commitments, they tend to be smaller than their foreign counterparts.

The dominance of foreign companies can also be seen in offshore wind. Last week, European companies captured the bulk of leases in California’s $757mn offshore wind auction.

The Inflation Reduction Act included generous tax credits to incentivise the domestic manufacturing of clean energy. The US currently only produces enough to meet half of solar demand, according to Wood Mackenzie.

Despite these commitments, the consultancy warns that the US solar market remains heavily reliant on imports, largely from Asia. The country lacks production capacity for crucial inputs such as polysilicon, wafers and cells.

In a report released today, the consultancy predicts trade barriers would limit solar deployment in 2023 and mute the effect of the IRA. Additions of US solar capacity declined 17 per cent year over year due to trade barriers and supply chain constraints, according to Wood Mackenzie and the Solar Energy Industries Association. (Amanda Chu)

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Power Points

Energy Source is a twice-weekly energy newsletter from the Financial Times. It is written and edited by Derek Brower, Myles McCormick, Justin Jacobs, Amanda Chu and Emily Goldberg.

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